Chevron 2004 Annual Report Download - page 32

30 CHEVRONTEXACO CORPORATION 2004 ANNUAL REPORT
Management’s Discussion and Analysis of Financial Condition and Results of Operations
In฀November฀2004,฀ChevronTexaco฀and฀its฀partners฀in฀the฀
Brass฀LNG฀Project฀awarded฀the฀contract฀for฀front-end฀engineering฀
and฀design฀for฀a฀world-scale฀LNG฀plant฀to฀be฀located฀in฀Nigeria.฀
The฀LNG฀plant฀will฀have฀two฀processing฀trains฀with฀potential฀pro-
cessing฀capacity฀of฀5฀million฀metric฀tons฀each.฀ChevronTexaco฀is฀
expected฀to฀supply฀a฀major฀amount฀of฀feed฀gas฀to฀the฀LNG฀project.
In฀Angola,฀front-end฀engineering฀and฀design฀work฀is฀sched-
uled฀to฀begin฀in฀the฀first฀half฀of฀2005฀for฀the฀construction฀of฀
a฀multibillion฀dollar฀LNG฀processing฀plant฀that฀also฀will฀help฀
eliminate฀natural฀gas฀flaring฀associated฀with฀crude฀oil฀producing฀
operations.฀The฀company฀has฀a฀36฀percent฀ownership฀interest฀in฀
the฀plant฀and฀will฀co-lead฀the฀project฀with฀the฀Angolan฀govern-
ment’s฀national฀oil฀company.฀
In฀September฀2004,฀the฀company฀was฀awarded฀authorization฀
from฀the฀Mexican฀Environment฀and฀Natural฀Resources฀Secretariat฀
for฀its฀Environmental฀Impact฀Assessment฀and฀Risk฀Assessment฀for฀
a฀proposed฀LNG฀receiving฀and฀regasification฀terminal฀offshore฀Baja฀
California,฀Mexico.฀In฀December฀2004,฀the฀company฀was฀awarded฀
a฀natural฀gas฀storage฀permit฀from฀the฀Mexican฀Regulatory฀Energy฀
Commission฀for฀a฀proposed฀natural฀gas฀terminal.฀The฀company฀
also฀received฀notice฀from฀the฀Mexican฀Communication฀and฀Trans-
port฀Secretariat,฀through฀its฀Port฀Authority,฀that฀it฀won฀the฀public฀
licensing฀round฀for฀the฀offshore฀port฀terminal.
In฀November฀2004,฀the฀company฀announced฀it฀had฀plans฀to฀
submit฀permit฀applications฀for฀a฀proposed฀LNG฀import฀terminal฀
to฀be฀located฀at฀the฀company’s฀Pascagoula฀Refinery.
In฀December฀2004,฀the฀company฀announced฀the฀finalization฀
of฀a฀20-year฀agreement฀for฀regasification฀capacity฀at฀the฀proposed฀
Sabine฀Pass฀LNG฀terminal฀in฀Louisiana.

Worldwide฀Reorganization฀ In฀early฀2004,฀the฀company’s฀down-
stream฀businesses฀began฀operating฀as฀global฀refining,฀marketing,฀
and฀supply฀and฀trading฀businesses.฀Previously,฀these฀functions฀
were฀aligned฀by฀the฀individual฀geographic฀areas฀in฀which฀the฀
company฀operates.฀This฀realignment฀is฀targeted฀to฀improve฀
operating฀efficiencies฀and฀financial฀performance.฀
Singapore฀Joint฀Venture฀ In฀July฀2004,฀the฀company฀acquired฀
an฀additional฀interest฀in฀the฀Singapore฀Refining฀Company฀Pte.฀
Ltd.฀(SRC),฀increasing฀its฀ownership฀from฀33฀percent฀to฀50฀per-
cent.฀This฀additional฀interest฀in฀SRC฀is฀expected฀to฀strengthen฀
ChevronTexaco’s฀existing฀strategic฀position฀in฀the฀Asia-Pacific฀
area,฀one฀of฀its฀core฀markets.
China฀Joint฀Venture฀ In฀January฀2005,฀the฀company฀
announced฀a฀preliminary฀agreement฀for฀a฀business฀partner฀in฀
China฀to฀take฀a฀majority฀interest฀in฀the฀company’s฀existing฀joint฀
venture฀that฀operates฀retail฀service฀stations฀in฀South฀China.
Asset฀Dispositions฀ Throughout฀2004,฀the฀company฀continued฀
the฀marketing฀and฀sale฀of฀service฀station฀sites.฀Dispositions฀of฀
about฀1,600฀sites฀occurred฀from฀the฀program’s฀inception฀in฀early฀
2003฀through฀the฀end฀of฀2004.฀In฀February฀2005,฀the฀company฀
announced฀a฀memorandum฀of฀understanding฀to฀negotiate฀the฀
sale฀of฀approximately฀140฀service฀stations฀in฀the฀United฀Kingdom.
Texaco฀Brand฀ Under฀terms฀of฀an฀agreement฀executed฀at฀
the฀time฀of฀the฀merger฀with฀Texaco,฀the฀company฀regained฀non-
exclusive฀rights฀to฀use฀the฀Texaco฀brand฀in฀the฀United฀States฀on฀
July฀1,฀2004,฀and฀resumed฀marketing฀gasoline฀under฀the฀Texaco฀
retail฀brand฀in฀the฀United฀States฀in฀mid-2004.฀By฀the฀end฀of฀the฀
year,฀the฀company฀was฀supplying฀more฀than฀1,000฀Texaco฀retail฀
sites฀primarily฀in฀the฀Southeast.฀The฀company฀plans฀to฀supply฀
additional฀sites฀in฀the฀Southeast฀and฀West฀during฀2005.

Saudi฀Arabia฀ The฀company’s฀50฀percent-owned฀affiliate,฀CPChem,฀
began฀construction฀of฀an฀integrated฀styrene฀facility฀and฀expan-
sion฀of฀an฀adjacent฀aromatics฀plant฀at฀Al฀Jubail,฀Saudi฀Arabia,฀in฀
the฀fourth฀quarter฀2004.฀The฀project฀is฀scheduled฀for฀completion฀
in฀the฀first฀half฀of฀2008.

Common฀Stock฀Dividends฀and฀Stock฀Repurchase฀Program฀ In฀
September฀2004,฀the฀company฀increased฀its฀quarterly฀common฀
stock฀dividend฀by฀10฀percent฀and฀immediately฀followed฀the฀
dividend฀increase฀with฀a฀two-for-one฀stock฀split฀in฀the฀form฀of฀a฀
stock฀dividend.฀In฀connection฀with฀a฀stock฀repurchase฀program฀
initiated฀in฀April฀2004,฀the฀company฀purchased฀42,324,000฀shares฀
in฀the฀open฀market฀for฀$2.1฀billion฀through฀December.฀Purchases฀
through฀the฀end฀of฀February฀2005฀increased฀the฀total฀shares฀
acquired฀to฀47,969,000฀shares฀for฀$2.4฀billion.฀The฀repurchase฀
program฀is฀in฀effect฀for฀up฀to฀three฀years฀from฀the฀date฀initiated฀
for฀acquisitions฀of฀up฀to฀$5฀billion.

Major฀Operating฀Areas฀ The฀following฀section฀presents฀the฀results฀
of฀operations฀for฀the฀company’s฀business฀segments,฀as฀well฀as฀
for฀the฀departments฀and฀companies฀managed฀at฀the฀corporate฀
level.฀(Refer฀to฀Note฀9฀beginning฀on฀page฀60฀for฀a฀discussion฀
of฀the฀company’s฀“reportable฀segments,”฀as฀defined฀in฀FAS฀
131,฀“Disclosures฀About฀Segments฀of฀an฀Enterprise฀and฀Related฀
Information.”)฀To฀aid฀in฀the฀understanding฀of฀changes฀in฀seg-
ment฀income฀between฀periods,฀the฀discussion,฀when฀applicable,฀
is฀in฀two฀parts฀–฀first,฀on฀underlying฀trends฀and฀second,฀on฀
special-item฀gains฀and฀charges฀that฀tended฀to฀obscure฀these฀
trends.฀In฀the฀following฀discussions,฀the฀term฀“earnings”฀is฀
defined฀as฀net฀income฀or฀segment฀income฀before฀the฀cumulative฀
effect฀of฀changes฀in฀accounting฀principles.฀This฀section฀should฀
also฀be฀read฀in฀conjunction฀with฀the฀discussion฀of฀the฀company’s฀
“Business฀Environment฀and฀Outlook”฀on฀pages฀26฀through฀28.
U.S.฀Upstream฀–฀Exploration฀and฀Production
Millions฀of฀dollars  2003 2002
Income From Continuing Operations  $ 3,160 $ 1,703
Income From Discontinued Operations   23 14
Cumulative Effect of Accounting
Change   (350) –
  $ 2,833 $ 1,717
*Includes Special-Item Gains (Charges):
Asset Dispositions
Continuing Operations   $ 77 $ –
Discontinued Operations  – –
Litigation Provisions  – –
Asset Impairments/Write-offs   (103) (183)
Restructuring and Reorganizations  (38) –
Environmental Remediation Provisions  – (31)
Total   $ (64) $ (214)